Bank stocks moved into positive territory on Monday despite steep losses by U.S.-listed shares of Credit Suisse, as the Federal Deposit Insurance Corp. successfully moved ahead with transactions to find homes for two of the three banks that failed earlier this month.
After a fresh downgrade of its debt over the weekend, First Republic Inc.
dropped 14% to an all-time low of 19.81 a share, below its record-low close of $22.48 on Oct. 3, 2011.
U.S.-listed share of Credit Suisse
plunged 49%, while those of UBS Group
rose 8% after UBS said it would pay $3.25 billion to buy its Swiss rival in order to stabilize the banking system.
San Francisco-based First Republic Bank is planning to raise money from other banks or private-equity firms by selling new shares, the New York Times reported late Friday, citing people with knowledge of the discussions.
While the bank received $30 billion in deposits from 11 banks last week, it lost $89 billion in deposits during the same period, according to numbers the bank released late Thursday.
S&P said Sunday that it had cut its rating on First Republic by another three notches, to B+, just four days after cutting it by four notches from A- to BB+, the first speculative grade, or junk rating.
“The $30 billion in deposits that First Republic reported it will receive from 11 large U.S. banks should ease near-term liquidity pressures, but it may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing,” S&P said.
“B” ratings at S&P mean an entity is “more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments,” the ratings agency said.
Typically, one notch of a downgrade equates to an increase of 0.25% in borrowing costs, but a multi-notch downgrade may affect a company even more as a sign of deeper trouble ahead.
JPMorgan Chase & Co.
rose 1.5%, Goldman Sachs Group Inc.
rose 1.6%, Bank of America Corp.
rose 0.8% and Citigroup
rose 1.5%. Wells Fargo & Co.
moved up by 0.3% and Morgan Stanley
advanced by 1.8%.
Among gainers, New York Community Bancorp
is rallying by 33% after its Flagstar Bank unit said it would assume most of the deposits and some of the loans of Signature Bank, which was one of the three financial firms to go out of business in the past two weeks.
New York Community Bancorp CEO Thomas R. Cangemi said the deal did not include any of Signature Bank’s digital assets business.
Wedbush on Monday upgraded New York Community Bancorp to outperform from neutral based on its expected earnings boost from its acquisition of Signature Bank’s loan and deposit portfolio.
“[New York Community Bancorp] benefits from a sweetheart deal as FDIC priced the assets to move quickly,” analyst David Chiaverini said in a research note.
The FDIC said Flagstar will receive Signature Bank‘s 40 former branches as of Monday.
SVB Financial, the former parent of Silicon Valley Bank, on Monday said it has received “significant interest” from prospective buyers in a reorganization effort underway with financial adviser Centerview Partners LLC.
The company also said it filed “first-day motions” in U.S. bankruptcy court to support operations of SVB Capital and SVB Securities.
On March 14, SVB Financial Group filed a voluntary petition for a court-supervised reorganization under Chapter 11 of the U.S. bankruptcy code after a run on deposits caused Silicon Valley Bank to fail. Silicon Valley Bank now operates as Silicon Valley Bridge Bank N.A. under the jurisdiction of the FDIC and is no longer affiliated with SVB Financial.
The FDIC said it’s extending the bidding for former units and assets of Silicon Valley Bank, which the government took over on March 10.
“There has been substantial interest from multiple parties, and the FDIC and the bidders need more time to explore all options in order to maximize value and achieve an optimal outcome,” the FDIC said.
The FDIC said it will allow parties to submit separate bids for Silicon Valley Bridge Bank and its Silicon Valley Private Bank units. Qualified, insured banks, as well as qualified, insured banks in alliance with nonbank partners, will be able to submit whole-bank bids or bids on the deposits or assets of the institutions, the FDIC said.
Bank and nonbank financial firms will be permitted to bid on the asset portfolios. Bids for Silicon Valley Private Bank are due by 8 p.m. Eastern time on March 22, and on March 24 for Silicon Valley Bridge Bank.
Citi’s U.S. bank analyst Keith Horowitz said the firm has been “fielding a lot of inbound questions on whether deposits are leaving the system altogether.”
All told, about $325 billion has left the U.S. banking system from deposits, with much of it going into Treasurys, he said.
Horowitz said money used to buy Treasurys will in turn be spent by the government and “eventually gets recycled back into the system as deposits.”
Tomi Kilgore and Claudia Assis contributed to this article.